Pakistan auto market is one of the fastest-growing car market. There is a huge demand for cars in Pakistan. In 2014, the Pakistani Auto sector made 1.5 lac cars, but in 2019, the Pakistani Auto sector almost made 3 lac cars, that’s shows how rapidly the Pakistani Auto market is growing.
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But in 2014, Pakistan had a monopoly of the big three’s (Toyota, Suzuki, Honda). Monopoly is always creating fear for consumers. Monopoly can create problems, like, It eliminates the competition, consumers have fewer choices, consumers depend on only one or two companies, Companies can increase their products price, whenever they want. To tackle this problem, In 2016, the government of Pakistan had launched the auto policy 2016-2021.
In this auto policy, The government of Pakistan wants to attract foreign car companies. Basically, Pakistan’s government will give tax incentives to those car companies, which come to Pakistan till June 2021. After this auto policy, many big brands has come to Pakistan, like, Hyundai, KIA, ISUZU, MG, Proton, Changan, DFSK Prince, United, and many other Chinese brands.
In last 4 years, almost ten new car companies enter in Pakistan auto market. But only three new car companies have shown the courage to launch small/hatchback budget-friendly cars in Pakistan. One company is united motors, and the second one is DFSK Prince, and the third-one is KIA. So here big question is rising, why companies like Hyundai, Proton, and Chinese companies are not considering to launch small cars in Pakistan.
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These are some major reasons car companies don’t want to launch small cars in Pakistan.
- Less profit
- Small production plant
- Fear of failure
Why small cars have less profit? There is no rocket science in this thing. Let’s consider, Toyota is making two cars one is a small/hatchback car called Toyota Vitz, and the second one is a sedan car called Toyota corolla. Toyota is making Toyota Vitz in 1 lac and Toyota corolla in 2 lac. But Toyota is selling Toyota Vitz with a price-tag of 10 lac and Toyota corolla with a price-tag of 20 lac.
You can clearly see that Toyota is making almost double the profit on Toyota corolla. Then why Toyota will make a car which gives the company less profit. So here, you guys might think that Toyota should make small cars for middle-class people. In response, I want to tell you that companies are not running on emotions; Companies run on profits. So companies make those cars, which will make companies more profitable. That’s why all new car entrants in Pakistan are launching sedans and SUV vehicles instead of small cars.
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Small Production plant
The production plant is one of the crucial parts of any car company. A production plant can make or break any company. In starting, companies usually have a small production plant. Because companies want to see the response of the public, if the public likes their company the company will surely expand the production plant. So due to the small production plant, companies not prefer to launch small cars.
You guys might hear about global phenomena called “Mass production resulted in lower prices of product”. So due to the small production plant, the cost of car increase. That’s why in Pakistan, small cars are expensive because companies don’t do mass production of the car. Here India has an advantage. In India, Companies do mass production of cars. If there is the mass production of cars, it means less costly. That’s why Indian cars are cheaper than that of Pakistan.
Fear of failure
We all know that Suzuki has a monopoly in the small cars segment. United motors and DFSK Prince launched small cars in Pakistan, but these companies have not got any success because Pakistani people don’t trust these brands. People prefer Pak Suzuki cars just because Suzuki is quite an old brand in Pakistan and its cars have good resale value.
In the small car category, Middle-class people also play a major role. Elite class people don’t prefer car brands. If they like a car, they buy that car. They usually don’t see the brand name and resale of the car. But on the other hand, Middle-class people prefer car brand and resale value over car quality and features. So middle-class people are the ones who are buying small cars. The Small car’s success always depends upon middle-class people. Middle-class people always see the resale value of a car, so how can new car entrants give the same resale value, which Suzuki cars are giving. That’s why new car companies are always preferring to target the elite class. New car companies are launching the SUV or sedan and making more profit. We also want to know your opinion about this, Please comment below and share your opinion.